Friday, December 01, 2017

Bhubaneswar: The selection of an operator to run flights between Bhubaneswar and Bangkok has emerged as a tricky issue for the Odisha government.

With both AirAsia and Air India keen to run flight operations between the two destinations, the state government is carefully evaluating the proposals made by the carriers.

AirAsia has tentatively agreed to launch operations to Bangkok from March or April next year. But, its proposal is accompanied by a rider -- the operator has sought a subsidy of Rs 1.70 lakh per flight run to make the service commercially viable. AirAsia Berhad, the low-cost carrier from Malaysia, already has a pact with the Odisha government under which it avails Viability Gap Funding (VGF) in the form of subsidy for providing international flight connectivity from Bhubaneswar to Kuala Lumpur.

AirAsia was the first to launch international flight operations from Bhubaneswar. The carrier was selected through an Expression of Interest (EoI) floated by the state government in July 2016. Subsequently, in February 2017, the state government and AirAsia signed an agreement to start conditional flight service to Kuala Lumpur on VGF granted by the government.

It remains to be seen whether in the changed context of the aviation sector, the state government could still grant subsidy to an airline. When AirAsia was selected through the bidding route, direct international flight services were yet to be launched from Bhubaneswar thought the city got the international airport tag in 2013. The state general administration department then, had decided to grant subsidy to incentivise the air carriers.

The equations have changed for now as Air India also has a competing offer to run flights to Bangkok.
01/12/17 Nirmalya Behera & Jayajit Dash/Business Standard